White House legal memo backs Pentagon's controversial equity investments in rare-earth firms
A 2025 White House legal opinion justified the Pentagon’s equity stake in MP Materials, arguing it fell under the Defense Production Act and avoided an imminent threat.
In June 2025, OMB General Counsel Mark Paoletta produced a legal opinion that the Pentagon’s $400 million equity purchase of rare-earth producer MP Materials was permissible because it was needed to avert an imminent threat to lives and government property, invoking the Defense Production Act, the 2017 defense authorization, and Article II of the Constitution. The Office of Strategic Capital (OSC) contributed a $150 million loan, while the Pentagon’s Acquisitions and Sustainment Unit executed the equity portion.
Former Pentagon officials warned that the Antideficiency Act would normally prohibit such expenditures, calling the legal rationale a stretch. Senate Armed Services Committee Chair Roger Wicker’s office said Congress must pass legislation giving OSC clear equity-investment authority and improve transparency. The Pentagon has since entered at least ten similar equity arrangements, many involving OSC and the Economic Defense Unit, raising concerns about due diligence and fairness in the selection process.
Why it matters
The memo reveals how the Pentagon sidesteps spending limits, prompting congressional scrutiny of defense-sector investments.
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